Japan's third-quarter economic contraction bigger than expected

Yahoo Finance ^

[Red in Blue PA]

TOKYO (Reuters) - Japan's economic contraction in July-September was deeper than initially expected on declines in capital expenditure, according to revised data on Monday that backs Prime Minister Shinzo Abe's recent decision to delay a second sales tax hike.

The data indicated that the hit from April's sales tax hike turned out to be bigger than expected.

Abe, who has called a snap poll for Sunday, hopes voters will agree that his stimulus policies and a decision to delay a second sales tax hike next year will revive a sputtering economy.

[blam]

Deflation kills.

[fhayek]

Well, now we have a new ready made rationalization for the next round of mediocre economic numbers for this country.

[Jack Hydrazine]

Completely unexpected? No.

As their population decreases so does their economy.

[GeronL]

not just decreases but ages and retires and sucks up all those resources from the economy

[Jack Hydrazine]

‘Zackly!

[GeronL]

and who wants to have kids in a pervert society where they are sex objects anyway

[SevenofNine]

Don’t forget aging population in Japan

[Zhang Fei]

Internet commentator on why the impact has been outsized:

The reason the tax is such a problem is because the cost of living in Japan is already exorbitant.

First, Japan has kept their domestic market closed to outside competition for generations. Food tariffs go as high as 800%, tariffs on goods, and non-tariff barriers drive up prices on other goods. Only 7% of the cars on Japanese roads are imports, you will never find a Samsung TV for sale in any Japanese electronics stores.

Next, price-fixing is an old cultural practice in Japan. The price for a movie ticket in Japan is 1800 yen. It doesn't matter which movie you see, or which theatre you go to, all of the theatres have agreed to set a minimum price. And movie theatres are the only ones. Real estate agencies all charge the exact same fee, other agencies do the same. Price fixing is widespread in the economy, and though it is technically illegal, it is very rarely punished.

Japan's employment system is heavily regulated, and full-time employees are difficult to fire, even if they do no work at all. Companies often have to hire a second worker to do the work the first worker can't or won't do. This adds to payroll costs, which are partly passed on to consumers, and is also compensated for by decreasing for new workers, giving fewer or lower raises, or simply not hiring full-time workers.

Then there are taxes. Property tax, income tax, residency tax, social insurance, national medical insurance, expensive highway tolls and gasoline taxes. The consumption tax is the icing on the cake (or straw on the camel's back). Unlike other sales or VAT taxes, Japan's 8% consumption tax is charged on all transactions, from ATM fees, to milk of your baby. Food and medicines are not exempt. In addition to this, the tax is not charged solely to the end consumer, it can be charged at different transaction levels. My office rent was raised by 3%, my utilities and phone bill were raised, my postage costs, and other expenses went up by 3%. These I pass on to my customers, plus, the additional 3% tax for the goods I sell. So the end result is that the 8% consumption tax ends up being much higher than 8% .

Among developed nations, the Japanese have among the lowest level of disposable income. The tax hurts because the cost of living is already so high.

[entropy12]

When you keep pumping the balloon for too long, deflation is guaranteed to follow.

[sushiman]

[entropy12]

Wow! Never knew Japan was so heavily taxed.

[Lurkina.n.Learnin]

That guy pretty much lays out Obama’s “Path to Prosperity”.

[Moonman62]

I think their problem is they’ve been relying on Big Government solutions since their economic collapse several years ago. We’re going down the same path.

[blam]

Japan's Economy Is In Deeper Trouble Than We Thought

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